Correlation Between LCI Industries and Marine Products

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Can any of the company-specific risk be diversified away by investing in both LCI Industries and Marine Products at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining LCI Industries and Marine Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LCI Industries and Marine Products, you can compare the effects of market volatilities on LCI Industries and Marine Products and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in LCI Industries with a short position of Marine Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of LCI Industries and Marine Products.

Diversification Opportunities for LCI Industries and Marine Products

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between LCI and Marine is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products and LCI Industries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on LCI Industries are associated (or correlated) with Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of LCI Industries i.e., LCI Industries and Marine Products go up and down completely randomly.

Pair Corralation between LCI Industries and Marine Products

Given the investment horizon of 90 days LCI Industries is expected to generate 0.89 times more return on investment than Marine Products. However, LCI Industries is 1.13 times less risky than Marine Products. It trades about 0.03 of its potential returns per unit of risk. Marine Products is currently generating about 0.02 per unit of risk. If you would invest  9,746  in LCI Industries on December 30, 2023 and sell it today you would earn a total of  2,560  from holding LCI Industries or generate 26.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

LCI Industries  vs.  Marine Products

 Performance 
       Timeline  
LCI Industries 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days LCI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, LCI Industries is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.
Marine Products 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Marine Products are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

LCI Industries and Marine Products Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LCI Industries and Marine Products

The main advantage of trading using opposite LCI Industries and Marine Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LCI Industries position performs unexpectedly, Marine Products can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Marine Products will offset losses from the drop in Marine Products' long position.
The idea behind LCI Industries and Marine Products pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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